When you quit or lose a job, the thought of losing your health care plan can add to your worry about the future. The good news is that under the Consolidated Omnibus Budget Reconciliation Act (COBRA), most people who work for public or private entities with 20 or more employees can keep the health plan they have through work when they leave their jobs.
If you want to keep your health plan through COBRA, you must leave your job through a “qualifying event.” This can include leaving your job for any reason other than gross misconduct or a reduction in the number of hours you work. Note that you must have been covered by the plan on the day before the qualifying event that caused you to lose your health care plan.
The length of time you’re covered will depend on when the event took place. If your job was terminated or your hours were cut, you can be covered for up to 18 months. If your job ended or your hours were cut, and you became eligible for Medicare 18 months before the event, COBRA coverage lasts up to 36 months after the date you became eligible for Medicare.
In most cases, COBRA has a high cost because you have to pay the full premium. You must pay for the portion your employer paid on your behalf when you had your job. You may also pay up to 2% for administrative fees. As of the 2019 plan year, the Shared Responsibility Payment of the Affordable Care Act (ACA) was canceled.
This means you don’t have to pay a tax penalty for not having health insurance if you choose to forgo COBRA or other options.If you cannot afford health insurance through COBRA but want and need a health care plan, there are other health plan options besides COBRA that may work for you.
Short-Term Health Insurance
You have the option of getting a short-term health plan to cover the lapse between your current plan and the one you will get at your new job. One of the best things about this alternative to COBRA is that you can quickly apply and get approved. It takes as little as 30 seconds to get a quote for a short-term plan online.
You can be covered as early as the day after you apply. What’s more, you can apply at any time, and not only during an open-enrollment window, as is the case with most health care plans.
These plans are cheaper than some of the other options to COBRA, and for a reason. For instance, you can be denied if you have a pre-existing condition. You should also be aware that this option may not cover certain vital health issues such as maternity care or mental health care.
Short-term health plans are only offered for between one month to just under one year. The length of time will depend on the state where you live. What’s more, the policy may impose a lifetime or annual dollar limit on coverage. It is not meant to be a long-term fix.
ACA Marketplace Health Insurance
ACA plans are among the best options to COBRA for those seeking a health care plan. Under the ACA, you can get a health care plan through your state’s health insurance Marketplace. This is a health plan shopping and enrollment exchange run by your state. It is also offered through the U.S. government if your state doesn’t have one. You can get a health plan through the ACA if you lawfully reside in the U.S. and are not in jail or prison.
You may even be able to get financial help from the government that could reduce or get rid of the cost of your ACA plan premiums. In all states, your income has to be between 100% and 400% of the federal poverty line for you to qualify for a tax credit towards your health care premium.
Independent Health Insurance
This COBRA option may work for you if you don’t meet the income rules to qualify for premium help for an ACA plan but want more broad coverage than a short-term plan offers.Independent health care plans can be purchased from private insurers outside of the ACA Marketplace.
These plans don’t get premium help since they are not Marketplace plans. You still could avoid paying higher COBRA costs because you can often find plans that offer good coverage at a lower cost than COBRA.
High-Deductible Health Insurance
Whether you choose a short-term, ACA, or independent health plan instead of COBRA, picking a high-deductible plan can reduce your monthly costs. These plans have a lower monthly premium but require you to pay more in up-front health care costs before the insurer begins to cover your health care.
High-deductible plans make sense to replace a COBRA plan if you think that you will not use your health plan often but want to have it just in case. This type of plan protects you from the most costly health care events. You will still need to pay the full cost for most doctor visits until you meet your deductible.